2023-07-28-莱坊-Shanghai_Office_Market_Report_Q2_2023_6页_2mb

Shanghai Grade-A Office Market Report - Q2 2023 Summary

Overview:

• In Q2 2023, four new office projects totaling 204,534 sqm were completed, affecting the market negatively due to supply. H1 2023 saw a total new supply of over 500,000 sqm, a 100% increase compared to H1 2022.
• Market absorption in Q2 was 121,331 sqm, decreasing by 35.9% QoQ. Net absorption in H1 2023 was 546,426 sqm.
• Average market rent decreased by 1.6% QoQ to RMB 8.34/sqm/day, with vacancy rates increasing slightly to 17.1%.
• New leasing demand mainly came from financial services, professional services, and retail brands. Lease renewal rates increased significantly by 13 percentage points QoQ.
• Core CBD rental rates showed resilience, while emerging business districts experienced a more pronounced rent decline.

Supply & Demand:

• New supply concentrated in Puxi districts (Putuo, Changning, Jing'an). Q2 completions included Hongqi Centre, Guosheng Tower, Haisu Culture Plaza, and Golden Square.
• Enterprises due to cautious expansion and cost control are more willing to renew leases. New lease signings and relocations for upgrading purposes decreased significantly.

Rent Outlook:

• Average Grade-A rents in core CBDs (Lujiazui, Nanjing West Road) remained relatively stable but decreased by 1.1% and 0.9% QoQ.
• The rental gap between core CBDs and emerging districts widened to RMB 4.5/sqm/day in Q2, up from RMB 3.9/sqm/day in Q2 2019.
• New projects in areas like Zhenru-Changfeng saw larger rent declines, falling by 3.3% QoQ.

Investment Market:

• Investment activity remained active in Q2 2023, with 13 en-bloc transactions worth over RMB 5 billion.
• Primary buyers included investment funds, state-owned enterprises, and domestic private enterprises. Owner-occupier transactions continued to dominate.

Key Data (Q2 2023):

District Highlights:

• High vacancy rates and lower rents were seen in areas like Hongqiao CBD (VR: 22.3%), Dalian Road (VR: 30.7%), and Xujiahui (VR: 24.6%).
• Core CBDs (e.g., Nanjing West Road) maintained higher rents (up to RMB 11.38/sqm/day).

Outlook:

• Market growth is under pressure from oversupply, with rents and occupancies in some areas at risk of a "double dip."
• Market differentiation is expected to increase, with areas unable to attract tenants facing continued rental and occupancy declines.

© Knight Frank Research. For illustration only. Not guaranteed complete or accurate.